We study a binary principal-agent model featuring two risk-neutral parties, in which the agent is protected by limited liability and his compensation is affected by an asymmetric treatment of gains and losses by the tax authority. The model challenges the common wisdom that the principal is...

This paper describes a simple way to integrate the debt tax shield into an accounting-based valuation model. The market value of equity is determined by forecasting residual operating income, which is calculated by charging operating income for the operating assets at a required return that...